Gold Price Forecast: XAU/USD holds above $2,020 as US Dollar strength caps gains

• Gold price gains some positive traction for the second straight session, though lacks follow-through.
• A modest US Dollar strength, along with easing fears of a full-blown banking crisis, act as a headwind.
• The Federal Reserve’s less hawkish outlook to limit the downside ahead of the US CPI on Wednesday.

Gold price edges higher for the second successive day on Tuesday, albeit lacks bullish conviction and remains below the $2,030 level through the early European session.

Modest US Dollar strength caps gains for Gold price

The Federal Reserve's (Fed) Senior Loan Officer Opinion Survey (SLOOS) showed on Monday that tightening credit conditions was due to the aggressive rate hikes rather than severe banking sector stress. This, in turn, fueled hopes that the banking sector in the United States (US) is not headed for a wider crisis and turns out to be a key factor capping the safe-haven Gold price. Meanwhile, the latest optimism led to the overnight sharp rally in the US Treasury bond yields and lends support to the US Dollar (USD), which contributes to capping the US Dollar-denominated commodity.

Federal Reserve’s less hawkish outlook lends support to XAU/USD

That said, the Fed's less hawkish outlook keeps a lid on any meaningful upside for the US bond yields and the USD, which, in turn, should continue to benefit the non-yielding Gold price. It is worth recalling that the US central bank last week outlined a more stringent, data-driven approach to raising rates further and opened the door for an imminent pause in its year-long rate-hiking cycle. Moreover, the markets have been pricing in potential rate cuts during the second half of this year, though the upbeat US jobs report released on Friday suggests that the Fed might remain hawkish for longer.

Focus remains on consumer inflation figures from United States

Nevertheless, the aforementioned fundamental backdrop seems tilted in favour of bearish traders and supports prospects for some downside for Gold price. That said, market participants seem reluctant to place aggressive bets and prefer to wait for the release of the latest US consumer inflation figures on Wednesday. The crucial US Consumer Price Index (CPI) report will play a key role in influencing market expectations about the Fed's next policy move. This, in turn, will drive the USD demand in the near term and provide a fresh directional impetus to the XAU/USD.

Gold price technical outlook

From a technical perspective, any subsequent move up is likely to confront some resistance near the $2,040 region ahead of the $2,050 supply zone. Some follow-through buying has the potential to lift Gold price back towards the all-time high, around the $2,078-$2,079 region touched last Thursday. The momentum could get extended further and allow bulls to conquer the $2,100 round-figure mark.

On the flip side, the $2,015 area might now protect the immediate downside ahead of the $2,000 psychological mark, which if broken might prompt some technical selling. The Gold price might then turn vulnerable to accelerate the fall towards the $1,980 zone en route to the $1,970 strong horizontal support. Some follow-through selling will negate any near-term positive outlook and shift the bias in favour of bearish traders.

Key levels to watch